20 Mar 2019
Young people are not taking out financial protection early enough in their lives, according to Royal London.
There is a mistaken perception that income protection (IP) will be too costly, but in reality it can be much cheaper than a gym membership.
New research by the financial services company shows three-quarters of independent financial advisers believe that younger consumers are not addressing their protection needs early enough, with 43% of advisers struggling to attract clients under the age of 35.
Nearly nine in 10 IFAs agree that IP is undersold in the industry, with the main barriers to selling or recommending the product being a lack of awareness of IP among clients.
Affordability was another obstacle for selling IP, according to the majority of advisers.
A barrier to selling IP to clients was that it was perceived to be too expensive, but Royal London found that a gym membership is more than double the price of IP.
Monthly gym membership fees in the UK are estimated to be £40.53. In comparison, a 30-year-old, non-smoking male working as an administrative officer could get £18,000 income protection for full term with a 13-week deferred period for less than £20 a month.
Seven in 10 advisers agreed that the protection gap is increasing, while 63% feel that protection products need to be tailored to fit the needs of the changing lifestyles of consumers.
IFAs were divided on the likelihood of providing protection to those working in the 'gig economy'.
Three in 10 believe the gig economy presents an opportunity to the IP market, with some advisers seeing it as a chance to engage with a sector that is typically underinsured. However, some advisers saw the rise of freelance work as a threat for the industry, mostly because the irregularity of work and income could make it harder for clients to commit to spending on protection plans.
Jennifer Gilchrist, a protection specialist at Royal London, said:
”It's clear from the research that we need to raise awareness of the benefits of income protection, especially amongst younger consumers.
”As part of this, we need to tackle the perception of protection being expensive.
”There is a whole range of options that can be personalised to individual budgets, and customers often tell us they are pleasantly surprised when they find protection isn't as costly as they anticipated."
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